Strong appetite for Bruntwood bonds

PROPERTY group Bruntwood has seen a “very strong” response to its retail bond which it hopes will raise £50m-£70m.

Speaking at an event to promote the offer, chief executive Chris Oglseby said demand had been in the regions where the Manchester business owns property, and admitted take-up in London had largely come from those who work in the property sector.

He would not say how much money had been raised so far, but said the fundraising, which concludes on July 17, was “on track”.

The bond is offering a fixed rate of 6% until 2020 on minimum investments of £2,000. The group, which owns 110 properties valued at £891m, will secure the bonds against seven properties: Alberton House, Manchester; Exchange Court, Liverpool; Lancastrian Office Centre, Old Trafford; West Gate, Leeds; South Central, Manchester; Wilderspool Business Park, Warrington; and Landmark House, Cheadle Hulme.

Mr Oglesby said: “Take-up has been very, very strong in the regions and through this process an awful lot of people in the regions will have a stake in Bruntwood and we think that’s really good for the business.”

Chris Babington, managing director of debt capital markets at Investec which is managing the offer, conceded that London investors had been wary of investing in the Northern property market, and in a family business, fearing it would not have stringent corporate governance.

He said: “I thought, ‘will we be able to sell property in the North?’ But I think it’s been changing over the last six to 12 months. Yields in London are getting so low that people are looking to diversify out.”

The bond issue concludes a year in which Bruntwood has sought to refinance against a gloomy economic backdrop and negative sentiment towards the property sector.

In January it secured a £120m loan with Legal & General to refinance part of the £432.5m of Commercial Mortgage Backed Securities (CMBS) which were initially arranged through RBS in 2007. In February it secured an extension on £229m of the CMBS. A further £75m will be refinanced by the bond issue and an extension to a £225m loan facility with RBS, HSBC and Barclays, which is ongoing.